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Create your own tax haven in the UK

18 April 2016

Why take your wealth abroad, when you can create your own tax haven right here?

With the recent ‘Panama Papers’ controversy and scrutiny of the Prime Minister’s father’s use of an offshore investment fund, the media spotlight has firmly honed in on the use of so-called offshore ‘tax havens’, Yet you don’t need to park your wealth in offshore centres to mitigate potential tax liabilities. David Smith, Director of Financial Planning at Tilney Bestinvest, highlights that with effective planning you can create your own legitimate tax haven here in the UK without needing to take your wealth abroad.

“Whilst UK taxation remains highly complex, it offers numerous Government backed tax efficient savings vehicles, tax allowances and preferential tax rates which allow much of the UK population to save tax free and potentially generate over £33,000 of tax free income / growth each year, from potentially taxable sources:

*Starting rate for savings is withdrawn by £1 for every £1 of ‘non-savings income’ over the personal allowance and is therefore unavailable for those with more than £5,000 of ‘non-savings income’.

“Taking the above into account, as an example, an individual in retirement with a state pension of £8,000 per annum, a private pension worth £3,000 a year, £300,000 in a savings account and £200,000 in a portfolio of shares or funds, could draw income, interest and capital from their portfolio and pay absolutely no tax whatsoever:

Income Source

Amount

Description

Tax

State Pension

£8,000

Taxable, but within personal allowance

£0

Personal Pension (annuity)

£3,000

Taxable, but within personal allowance

£0

Savings Account (2% interest)

£6,000

£5,000 Falls within Starting Rate of tax for savings, £1,000 within Savings Allowance

“This is just from the individual’s potentially taxable sources. When you then take into account private pensions from which they may be able to access tax free cash, ISAs which can generate tax free growth, income and capital withdrawals, tax free dividends from specialist investments such as Venture Capital Trusts (VCTs) and tax deferred withdrawals from investment bonds, the possibilities are enormous. What’s more, these are individual allowances; so a couple could achieve even more.

“Whilst the above example takes the allowances to the extreme, and many may scoff at the thought of having £500,000 in savings and investments, what is fair to say is that most, if not all of the above allowances, can be used by the majority of individuals in the UK in one way or another, ensuring even those with modest incomes can save tax free.

“Remember, these are allowances provided by the Government, they are an entitlement and a portfolio can be structured to take advantage of these - unlike tax sheltering offshore, it’s not avoidance, just good planning.”

The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Past performance is not a guide to future performance. This press release is not advice to invest or to use our services.

Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change. Please note we do not provide tax advice.

VCTs should be regarded as higher risk investments. They are only suitable for UK resident taxpayers who can tolerate higher risk and have a time horizon of greater than five years. Past performance is not an indication of future performance. Share values and income from them may go down as well as up and you may not get back the amount originally invested. Owing to the nature of their underlying assets, VCTs are highly illiquid. Investors should be aware that they may have difficulty, or be unable to realise their shares at levels close to that that reflect the value of the underlying assets. Tax levels and reliefs may change and the availability of tax reliefs will depend on individual circumstances. You should only subscribe for new VCT shares on the basis of the relevant prospectus and must carefully consider the risk warnings contained in that prospectus.

About Tilney

Tilney is a leading investment and financial planning group that builds on a heritage of more than 180 years. Our clients are private investors, charities and professional intermediaries who trust us with over £23 billion of their assets. We offer a range of services including financial planning, investment management and advice and, through our Bestinvest service, a leading online platform for those who prefer to manage their own investments.

We have won numerous awards. Tilney has been awarded Best Conventional Advisory Service at the 2018 City of London Wealth Management Awards, Best Advisory Service in the 2015 City of London Wealth Management Awards; Investment Award – Cautious category in the Private Asset Management Awards; and Stockbroker of the Year, Execution-only Stockbroker of the Year and Self-select ISA Provider of the Year 2015, as voted by readers of the Financial Times and Investors Chronicle. Bestinvest was voted Best SIPP Provider and Best Fund Platform at the 2017 City of London Wealth Management Awards, Best Direct SIPP Provider at the YourMoney.com Awards 2017, Best Stocks & Shares ISA Provider at the 2017 Shares Awards, as well as Best Self Select ISA Provider, Best Online/Execution-only Stockbroker and Best Investment Platform 2017 at the FT and Investors Chronicle Investment and Wealth Management Awards, as voted by readers of the FT and Investors Chronicle.

Headquartered in Mayfair, London, the Tilney Group employs over 1,000 staff across our network of 30 offices, enabling us to support clients with a local service throughout the UK.

Jason Hollands

Katy Moore

The value of your investment can go down as well as up, and you can get back less than you originally invested.

Past performance or any yields quoted should not be considered reliable indicators of future returns. Restricted advice can be provided as part of other services offered by Tilney Group, upon request and on a fee basis. Before investing in funds please check the specific risk factors on the key features document or refer to our risk warning notice as some funds can be high risk or complex; they may also have risks relating to the geographical area, industry sector and/or underlying assets in which they invest. Prevailing tax rates and relief are dependent on your individual circumstances and are subject to change.

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